coupon pass by the
Fed and optimism about the November
Consumer Price Index, to be released tomorrow, have enabled the bond market to pare its losses.
But with no economic indicators slated for today and the approach of year-end putting its customary damper on activity, trading volumes are quite low.
The benchmark 30-year Treasury bond -- down as much as 11/32 earlier as traders booked profits on the impressive run in yield terms from 6.32% on Dec. 2 to 6.17% on Friday -- was lately down just 4/32 at 99 9/32, its yield a basis point higher at 6.18%. Shorter-maturity note yields were unchanged to 2 basis points higher on the day.
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A Fed coupon pass seeking securities maturing from 2005 to 2016 accounts for some of the gains. Starting at around 10:20 a.m. EST, the Fed took $963 million of securities out of the market, on a day when only about $18 billion had changed hands as of 11:15 a.m. At 10 a.m., volume was 18.7% below the average for Mondays over the last month.
But Treasuries had already begun to pare their losses at the open this morning in what Michael Pianin, a vice president at
ING Barings Futures & Options
, attributed to classic dip-buying.
"What's the market been trying to do?" he said. "Since the
employment report" -- the November edition, released
Dec. 3 -- "it's been trying to do better, since the news seems supportive. So when we get a break in prices like we saw this morning, people are inclined to buy responsively."
The November CPI, Pianin said, "on the surface is supposed to be positive." Economists polled by
are forecasting gains of 0.2% overall and at the core, which excludes volatile food and energy prices.
Even if another key economic report on the docket for tomorrow -- November
retail sales -- is stronger-than-anticipated, "as long as it doesn't translate into headline inflation, people are not alarmed about it," Pianin said. "It's not something new that demand is strong."